Italy’s cost of borrowing for 10 years climbs to 3.4%

Italy’s cost of borrowing for 10 years climbs to 3.4%

Italy’s 10-year borrowing costs hit its highest level since March 2014 after a senior official of the ruling League party said most of the country’s problems would be solved if it returned to its own currency.

Italy would enjoy more favourable economic conditions outside of the eurozone, Claudio Borghi, the economic head of the ruling League party, said.

The yield on the country’s 10-year government bond rose 11 basis points to 3.4%, topping the level hit after a brutal selloff on May 29 when the concerns over redenomination risk were at their peak. 

In comparison, the implied cost of Ireland borrowing for 10 years was at 0.96%. 

The closely watched Italy-Germany bond yield spread stretched to 296 basis points, the widest since that May 29 selloff.

The country’s two-year government bond yield, meanwhile, was up six basis points to a one-month high of almost 1.43%, and the five-year government bond yield rose 9 basis points to a four-month high of almost 2.65%. 

Fears surrounding the populist Italian government’s fiscal plans also weighed on the euro. 

“I’m truly convinced that Italy would solve most of its problems if it had its own currency,” Mr Borghi said in a radio interview. 

Mr Borghi is a eurosceptic economist and chairs the budget committee of the lower house of parliament.

The leader of the European Commission warned of a Greek-style crisis, while reassurances that the country has no plans to ditch the euro did little to calm nerves. 

Amid the risk-off mood, the dollar climbed against almost all its major peers and emerging-market assets dropped.

While a deal between the US and Canada to revamp the Nafta trade deal with Mexico gave global risk appetite a boost at the start of the week, investor sentiment remains fragile amid a laundry list of threats to markets. 

Beyond Italy, Sino-American tensions are back in focus after the Chinese navy escorted a US missile destroyer from waters near South China Sea islands, in Beijing’s account of the incident.

Elsewhere, oil traded near its highest in almost four years as a slowdown in U.S. drilling adds to concern over supply losses from Iran and Venezuela.

Reuters, Bloomberg, and Irish Examiner

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